What are the different types of permanent
policies?
Whole or
Ordinary life
This is the most common type of permanent insurance policy. It
offers a death benefit along with a savings account. If you pick
this type of life insurance policy, you are agreeing to pay a
certain amount in premiums on a regular basis for a specific
death benefit. The savings element would grow based on dividends
the company pays to you.
Universal lifeThis type of policy offers you more flexibility than whole life
insurance. You may be able to increase the death benefit, if you
pass a medical examination. The savings vehicle (called a cash
value account) generally earns a money market rate of interest
based on investments similar to GIC's.
After money has accumulated in your account, you will also have
the option of altering your premium payments – providing there
is enough money in your account to cover the costs. This can be
a useful feature if your economic situation has suddenly
changed. However, you would need to keep in mind that if you
stop or reduce your premiums and the saving accumulation gets
used up, the policy might lapse and your life insurance coverage
will end. You should check before deciding not
to make premium payments for extended periods because you might
not have enough cash value to pay the monthly charges to prevent
a policy lapse. Universal Life also combines death
protection with a savings account that you can invest in mutual
fund type investments and funds mirroring money market mutual
funds. The value of your policy may grow more quickly, but you
also have more risk. If your investments do not perform well,
your cash value and death benefit may decrease. Some policies,
however, guarantee that your death benefit will not fall below a
minimum level.
This type of policy offers you more flexibility than whole life
insurance. You may be able to increase the death benefit, if you
pass a medical examination. The savings vehicle (called a cash
value account) generally earns a money market rate of interest
based on investments similar to GIC's.
After money has accumulated in your account, you will also have
the option of altering your premium payments – providing there
is enough money in your account to cover the costs. This can be
a useful feature if your economic situation has suddenly
changed. However, you would need to keep in mind that if you
stop or reduce your premiums and the saving accumulation gets
used up, the policy might lapse and your life insurance coverage
will end. You should check before deciding not
to make premium payments for extended periods because you might
not have enough cash value to pay the monthly charges to prevent
a policy lapse. 
